Basic income pilot recommended

Changing labour market could be part of reason for proposal in Ontario
By John Dujay
|Canadian HR Reporter|Last Updated: 02/21/2017

The concept of providing citizens with a guaranteed basic income has been floated for decades in Canada. And it could emerge once again if Ontario goes ahead with a pilot project this year, having held consultations in the fall.

The province may follow the lead of a discussion paper by Hugh Segal, master of Massey College at the University of Toronto, who suggested the province conduct pilot programs in three communities (and one neighbourhood in a large centre) whereby a monthly payment of $1,320 (plus an extra $500 for disabled persons) would be given to all residents (aged 18 to 65) who are living below a defined income level.

Currently in Ontario, basic social assistance or welfare programs are administered under the Ontario Works program and the recipients must be available to work. But Segal’s proposal eliminates that stipulation.

Definitions

In Canada, basic income has been referred to as a “negative income tax” or refundable tax credit because it could be administered in conjunction with the Canadian Revenue Agency. As a person’s income increases, benefits decrease, similar to what currently happens with the Canada child tax benefit, said Evelyn Forget, economist and professor at the University of Manitoba in Winnipeg.

“In Ontario, I think they are really seeing this basic income as a substitute for income assistance for basic welfare.”

It’s a cash transfer to individuals or families “that insures a minimum level of income without any conditions attached to it, like requiring recipients to work or look for work,” said Charles Lammam, director of fiscal studies at the Vancouver-based Fraser Institute.

It’s an income that ensures everyone is able to meet basic needs and live with dignity, regardless of work status, said Sheila Regehr, Toronto-based chairperson of the Basic Income Canada Network, a non-profit group. “(It’s an) unconditional cash transfer.”

But guaranteed annual income already exists in Canada, she said, citing the Guaranteed Income Supplement (GIS) for senior citizens. “We have been doing this for a generation and it’s working well.”

Pros and cons

The Ontario project could work, but only if it eliminates some of the bureaucracy in administering social assistance programs, said Lammam.

“In theory, having a single program that is much more efficient (and) more simple could be beneficial. For the GAI (guaranteed annual income) to be successful, a lot has to happen,” he said, such as getting all governments to agree on a national plan.

But a basic income plan would do better as a replacement to the social assistance system and not as an add-on, said Lammam.

“To realize that benefit of simplicity and efficiency, we need to be able to have that consolidation across governments which, we argue... is unlikely for a whole host of reasons,” he said. “There’s some theoretical appeal to a guaranteed annual income, and certainly there’s some potential to administrative savings but, in practice, there’s a big gap going from the ideal to the reality.”

Some groups fear the supplement might impose a negative outcome on the labour market.

Research conducted in the 1960s and 1970s found disincentives did affect labour market participation, said Lammam.

“By paying people not to work, that creates disincentives. I worry about how the GAI is being positioned as a be-all to fix poverty,” he said.

“Poverty is not always simply a lack of income. There are issues related to mental health and addiction that cannot be solved with a guaranteed annual income.”

But Regehr does not accept the idea of work disincentives.

“One of the moral conundrums lots of people deal with (is) the idea that people on low income just don’t want to work or they are lazy. It’s just not borne out by fact.”

A more acute problem for low-income Canadians are barriers to a productive life caused by poverty, she said, such as poor health.

While guaranteed income for all might cost more money to taxpayers in upfront costs, there are savings to be had, said Forget.

“You are not treating bad genes or bad luck, you’re treating the consequences of years and years of inadequate diets, inadequate housing. We are paying those costs one way or another.”

Changing labour market

A changing labour market might be another reason for government to guarantee basic income.

“We have this new economy where more and more people are being affected by job loss due to automation, the effects of globalization, with jobs moving offshore,” said Regehr. “There are many reasons people put forward in support of a basic income and this is a key one.”

“It’s impossible to blame individuals for their situation when all of this is happening in the larger economy,” she said. “Even if down the road we find jobs for everybody sufficient to give you a half-decent income, in the meantime, people really suffer.”

The current makeup of the labour force is geared toward the 40-hours-per-week model, said Forget.

“If you think about the differences in the labour market between the 1970s and today, I think it’s pretty clear that the kind of income assistance programs we have are set up for a world where people work 40 hours a week — for a particular firm — and you could distinguish between full-time and part-time workers.”

Today, it is harder for young Canadians to find full-time work, she said. “All of that seems to be disappearing.”

With a guaranteed income, some workers and employers might feel they have more elasticity in deciding what work they would be willing to do.

“Without question, it makes it easier for employers to adopt a more flexible view of hiring labour,” said Forget.

For example, it would be easier to hire a person to work a three-month contract if he doesn’t have worry about where the next paycheque is coming from.

But low-wage employers might face pressure to improve offerings to workers, said Forget. “There might be some people who say, ‘I’m really not prepared to do that kind of a job for that kind of a wage.’”

However, increased automation will not make workers’ jobs disappear right away, said Lammam.

“The solution to major changes is about creating an economic framework that ensures increased growth and increased job creation,” he said. “Transition programs that encourage people to find alternative work, I think, are more fruitful.”

Whether automation or globalization removes jobs, something has to be done, said Forget.

“We need some way of transitioning from the kind of economy we’re in now to whatever is developing out there.”

SIDEBAR

Previous attempts

Basic income is an idea that has been proposed by various levels of governments over the years: A 1971 Senate committee floated the idea and the Macdonald Royal Commission proposed a scheme in 1986. The federal Liberal party also endorsed basic income during its 2014 convention.

And from 1974 to 1979, there was a basic income project known as the Manitoba basic annual income experiment (MINCOME). About 1,000 families in Dauphin and Winnipeg — who qualified via their income levels — received monthly cheques.

In Winnipeg, the project employed a “randomized sample” in which a small portion of the population received cheques, while in Dauphin, all of qualified residents received payments, making it a “saturation site,” said Evelyn Forget, economist and professor at the University of Manitoba in Winnipeg.

Funding for the $17-million program was shared by the Manitoba government and the federal government.

However, MINCOME was cancelled and a full-scale study of its impact was not completed.

“By the time the project had ended, nobody was very much interested in the outcomes anymore, so really all the data was sort of shelved and nobody did very much with it,” said Forget. “That pretty much was it; it disappeared at that point, it wasn’t part of the conversation anymore.”

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